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Choosing health insurance

There are more options than you might think, even if you have to buy on your own

Published: September 2012

Your health insurance options vary depending on whether you have a job, have to buy insurance your own, are 25 or younger, or have a pre-existing medical condition, like a history of asthma or heart disease. Shown below is our advice for each of those situations.

If you get insurance at work

Most people younger than 65 get health insurance through a job. Employee group plans vary enormously in cost and scope of benefits. To make the most of your plan, start by finding out who in your company administers it (probably someone in the human resources department, if there is one) and ask for a description, often called a Summary of Benefits. Make sure it answers these questions:

What are the plan's benefits?

Find out exactly what's covered and any limitations, too. For example, some plans limit the number of rehabilitation visits they'll pay for, or charge a higher co-insurance for certain drugs.

What doctors are in your provider network? In almost every group health plan nowadays, you have to use doctors, labs, clinics, and hospitals within its network to get the best price. You can probably look up the participating providers nearest you on your plan's website.

Does the plan have a drug formulary? You'll pay less for drugs if you stick with your plan's formulary, or list of preferred medications. The plan's website might have the list, but double-check with your provider or pharmacy because networks and pharmacies can change without warning. Ask especially about any drugs you take regularly.

Is your plan self-insured? Most large companies and some mid-sized ones don't buy insurance for their workers. They self-insure, meaning they pay for their employees' health expenses on their own, contracting with health insurers only to handle claims and supply a network of providers. That matters because your rights and protections vary depending on what kind of insurance you have.

Is your plan grandfathered? The Affordable Care Act set up new consumer protections, some of which apply only to "new" plans, aka "nongrandfathered" plans. Your plan is required to tell you whether or not it is grandfathered.

When can you join your employee plan? Many larger employers offer a choice of two or more plans. In most cases you can switch to a different plan or sign up for one only during your employer's annual open enrollment period, usually in the fall. But under certain circumstances, known as special enrollment opportunities, you can join your company's plan at any time. An example: If you get coverage through your spouse's group plan instead of your own, and then your spouse loses or quits his or her job, you can sign up for your own employer's plan without waiting for open enrollment.

How do you appeal a denial of benefits? Your right to appeal primarily depends on what state you live in and whether your plan is self-insured or fully insured. The Affordable Care Act has expanded consumer appeal rights, but changes are being phased in gradually and are complex. If your health plan turns down a benefit, it will usually give you an explanation of benefits or a denial notice stating the reason and telling you how you can appeal.

Choose a plan category such as private HMO or PPO, or Medicare HMO or PPO.

Choose a state.

Customize your search to compare plans' scores and their performance in measures such as consumer satisfaction and providing preventive services.

If you have lost your job

Losing your job often means losing your health insurance, too. Fortunately, many people are able to continue coverage under federal law. The Affordable Care Act adds to those rights and protections, but the most significant additions won't take effect until 2014.

Here are some coverage options for health insurance if you're unemployed:

Join your spouse's or domestic partner's plan. This will almost certainly be the most affordable option. Generally, you can switch to a plan that your spouse or domestic partner has without waiting for the next open-enrollment period. If your whole family was covered under your plan and your spouse previously declined coverage under his or her plan, the entire family can immediately switch as well. The federal Health Insurance Portability and Accountability Act (HIPAA) gives you this right, called a special enrollment opportunity. But you have to make your move within 30 days of losing your previous coverage.

Sign up for COBRA. If you were terminated by a company with 20 or more full-time employees and had health insurance there, COBRA gives you and your dependents the right to stay on the company's health plan for 18 months (36 months for people with disabilities) after being let go.

Your employer is required to mail you a notice about COBRA when you leave your job. It has to include how much you'll have to pay for the coverage. You have to sign up for COBRA within two months of losing your health insurance.

Many states plus the District of Columbia have "mini-COBRA" laws that extend COBRA rights to people who work at companies with fewer than 20 employees. But under federal COBRA and state mini-COBRA, you'll have to pay the entire premium yourself. That includes the portion your former employer used to pay—usually around 70 to 75 percent. A 2 percent administrative fee is also tacked on.

If you can afford it, we recommend taking COBRA because it will probably offer more comprehensive coverage than an individual plan. And if you have a pre-existing condition, you might not be able to find an affordable individual health insurance plan that will accept you.

Some COBRA exceptions: If your former employer goes out of business or drops its entire group health plan, there's no COBRA. This is true even if you have already been on COBRA for a while. Also, if you were fired for gross misconduct, you're not eligible.

Consider individual insurance. If you're unemployed and in good health, you might be able to find an individual health insurance policy that's more affordable than the employer coverage options above, although the coverage might not be as good. Check out your options at Healthcare.gov.

Look into conversion and HIPAA coverage. If you can't get individual insurance because of a pre-existing condition but are coming off an employee group plan, you have some options you wouldn't have otherwise. In most states, if you're not eligible for COBRA or mini-COBRA, the law requires your employer's insurer to convert your coverage to an individual plan. And in every state, the HIPAA law guarantees you the right to purchase an individual plan. States vary in how they handle this, but in most cases insurers can charge whatever they want—usually a lot. Your state insurance department can provide you with details on both these options.

Investigate Medicaid or CHIP. If your family income takes a big enough hit from your job loss, you or your children might be eligible for Medicaid or the Children's Health Insurance Program (CHIP). Eligibility rules vary widely from state to state. You can find out if you qualify at Healthcare.gov or via your state Medicaid office. If you're eligible for COBRA and your children for CHIP, you might be able to save money by putting the children on CHIP and you and your spouse on COBRA.

Take advantage of being a veteran. Unemployed veterans might qualify for free or reduced-price treatment at Veterans Affairs (VA) hospitals and clinics. The VA doesn't have enough funding to cover all veterans, though, so it has a priority list, with those who have been injured or disabled in combat at the top. Financial need is also taken into consideration. Check with your nearest VA facility to see if you qualify.

Look for a high-risk pool. If you have a pre-existing medical condition and remain uninsured for six months, you might qualify for one of the new federally subsidized pre-existing condition insurance plans. If you don't want to wait six months or if you don't live in one of the 35 states that offer one, you can join high-risk pools that existed before the health-reform law. Here are two options:a federally subsidized plan or a state high-risk pool.

If you are uninsured

If you're newly uninsured because you've recently lost your job, you have some rights you might not be aware of. But if you simply cannot afford health insurance, here's what you should know:

Don't count on an emergency room. It's true that if you show up in an emergency room with a medical problem that requires urgent attention, such as a broken bone or bad cut, the hospital is legally required to stabilize you if it is one that accepts Medicare funds. But you will receive a bill afterward, possibly a very large one, and the hospital might be aggressive about trying to collect payment.

Investigate public programs. Eligibility for Medicaid and the Children's Health Insurance Program varies from state to state, so it pays to find out whether you or your children qualify. Healthcare.gov's plan finder can guide you to more information.

Go to a community health center. There are more than 8,000 across the country. They provide basic outpatient care—including, in some cases, dental and mental-health services—and they charge according to a person's ability to pay. Find the center nearest you.

Ask doctors to cut your bill. No one pays the sticker price for health care except, paradoxically, uninsured people who don't have the benefit of the big discounts that public and private insurers negotiate on behalf of their members. Many doctors will offer a similar discount to uninsured people paying bills, especially those paying at the time of treatment, but you have to ask.

Comparison shop for prescription drugs. You can easily end up paying more than you need to by, say, failing to compare prices at more than one pharmacy, or taking an expensive brand-name drug when a cheaper generic could work just as well. Our money-saving guides can help you evaluate the options.

Take advantage of health fairs. Many community groups periodically run health fairs that include free screenings for such conditions as hearing loss, high blood pressure, and high cholesterol. Some also offer free flu shots and vision screenings.

Look for disease-specific programs. There are dozens of them but you have to know where to look and, in many cases, follow some very specific rules. The federally funded Breast and Cervical Cancer Treatment Program, for example, will pick up the entire cost of treatment for low-income women. But to qualify in many states, your condition must have been diagnosed at one of the program's approved screening centers. If you received a diagnosis elsewhere, you're not eligible. Find the screening program nearest you. Needymeds.org, a website run by a nonprofit group, lists a number of financial-assistance programs for specific diseases in an easy-to-search format.

Apply for free or reduced-price hospital care. Many facilities have programs for people who are struggling financially. Community Catalyst, a consumer advocacy group in Boston, has an interactive map that can help you find relevant laws and policies in each state.

But it can be a challenge looking for charitable assistance and applying for it. The Affordable Care Act has several provisions designed to help uninsured or underinsured patients who can't afford hospital care. The law says that all nonprofit hospitals must develop a written policy on financial assistance, including information on who's eligible and how to apply, which they must make "widely available" to the public.

In addition, hospitals will no longer allowed be to charge uninsured patients the full list price for their care. And hospitals can no longer engage in aggressive bill-collecting tactics, like garnisheeing wages, putting liens on a home, or turning a debt over to an outside collection agency, without first making "reasonable efforts" to determine whether a person is eligible for financial assistance. But the government has yet to issue regulations or guidance on how the provisions are to be enforced, according to Jessica Curtis, director of the Hospital Accountability Project at Community Catalyst.

So for now it's up to you to aggressively pursue free or reduced-price care, Curtis says. Start with the hospital billing office, social worker, or patient representative. If you don't get satisfactory results the first time, keep trying. Curtis says hospital staff members might not know about the policy, even though they're supposed to.

If you buy on your own

Individual health insurance is the hardest kind to buy, because you can't rely on the expertise of an employer, union, or association to screen out bad plans. And without an employer to pick up at least part of the cost, it's also usually the most expensive. Until the health care reforms are fully in place in 2014, you can be turned down or charged more for an individual policy in most states if you have a pre-existing condition.

Here's what you should know about buying insurance on your own:

Consider alternatives. The options below can be cheaper, more comprehensive, or both compared with an individual health plan, and are available to people with pre-existing conditions. But not everyone is eligible.

A group plan through the job of a spouse, domestic partner, or parent. If a family member has a job that offers dependent coverage, you can join it at any time if you have lost other coverage. And adults 25 and younger can now stay (or go back) on their parents' insurance thanks to health-care reform. (The exceptions are retiree-only plans and Medicare.)

Public insurance options. They include Medicare, Medicaid, and the Children's Health Insurance Program (CHIP). Check at HealthCare.gov for income and other eligibility requirements.

COBRA. It's a federal program that lets you continue your employer-based coverage for 18 months (and sometimes longer) if you lose or leave your job. You'll have to pay the full premium, including the part your employer used to pay, but that might be cheaper than buying your own especially if you have a pre-existing condition.

Other special options for people who have quit or lost a job . They include being allowed to convert a group plan to an individual one.

Understand what you need. Good insurance not only helps with your current medical needs but also protects you against ruinous future expenses for accidents or illnesses. That's why you should get a comprehensive policy that covers doctors, outpatient treatments like chemotherapy, diagnostic and screening tests and procedures, prescription drugs, hospital care, rehabilitation, and mental-health care. Learn more about what to look for in a plan.

Make sure you buy real insurance. Beware of sales pitches from agents, telemarketers, e-mail, faxes, roadside signs, door-to-door salesmen, or websites that seem to promise too much, offer "discount" insurance, emphasize very low premiums and "big savings" even if you're in poor health, or tell you that you have to buy health insurance because of the new reform law. You risk ending up with junk insurance that could leave you broke if you ever get sick. Read more about how to choose a good plan.

You'll also find links to a plan's provider networks and drug formulary. And you can see the "preferred" (best) premium for each plan for a person of your age and gender, as well as the percentage of applicants who are refused coverage or charged extra because of pre-existing conditions.

Apply to multiple plans for coverage. If you have any concern about pre-existing conditions, apply for multiple policies simultaneously from several companies. Companies might treat the same conditions differently depending on their underwriting guidelines and other factors.

Be aware that certain serious illnesses, such as diabetes, schizophrenia, and multiple sclerosis, will get you automatically turned down in most states. If you do get turned down for a pre-existing condition, here are some options.

Most carriers will accept applications directly online or over the phone. But also consider working through an independent licensed broker who represents several of the companies you're interested in. (Avoid "captive" agents who sell only one company's insurance.) An experienced broker can help you understand the trade-off between, say, higher deductibles and lower premiums. And if you have a pre-existing condition, a broker can also request what's called a "pre-screen" from each carrier, which is an assessment of whether the carrier might insure you, and at what estimated cost, based on your health history. This can be done without disclosing your identity, and it's something you can't do on your own.

If you are 25 or younger

A key provision in the health-reform law allows you to look forward to high school or college graduation without worrying about being kicked off your parents' health-insurance plan. Under the new law, children can remain covered by their parents' insurance up to their 26th birthday, even if they're no longer in school or living with them.

Here are answers to some basic questions about getting insurance as a young adult:

Am I eligible to stay on my parents' plan? You can stay on their plan even if you move away from home or become self-supporting enough that your parents can no longer claim you as a dependent on their income taxes. You can even stay on their plan if you get married.

My parents are retired. Does that make a difference? It might. Retiree-only plans aren't required to cover young-adult children of beneficiaries. If your parents are on Medicare, you're out of luck, since the plan doesn't cover any dependents, even spouses.

Can I rejoin my parents' plan after leaving it? Yes. As long as you're younger than 26, you can go on and off their plan as many times as you want. For instance, you might land a job with health benefits right out of college, but decide to quit after a couple of years to go back to graduate school. At that point, you can rejoin your parents' plan.

What happens if I'm too old for my parents' plan but still don't have a job with health benefits? You can shop around for an individual policy. Because you're young, the premiums will be relatively affordable in most states. You can search at HealthCare.gov for policies. If you have a pre-existing condition that makes getting an individual plan expensive or impossible, you can sign up for COBRA continuation coverage under your parents' plan, and you can stay on it for up to three years. By that time—2014—you'll be able to buy affordable coverage on your own through the new insurance exchanges.

I'm the parent. Anything else I need to know? Your workplace can't charge a different premium for your adult children than it does for your younger children. So, for instance, if your company charges a single "family" rate for health insurance, that's what you'll pay to cover your young adult. If you know your child will be living far from home, check the availability of in-network care where he or she will live. If it's not good on the plan you have and your employer has other options, look for one with a better provider network near your child and switch to it during your next open enrollment period. Otherwise, your child might have to come home for nonemergency care or pay more for out-of-network treatment

If you have a pre-existing condition

If you get your insurance at work (whether as an employee or dependent), you don't have to worry about being denied coverage because of a pre-existing medical condition. That's long been against the law. But it's a different story if you buy insurance on your own. In most states, insurers can turn you down flat, charge you much higher premiums, or offer coverage that excludes your pre-existing condition completely.

Some states require insurers to "guarantee issue" private plans to all comers, regardless of pre-existing conditions, though they might be costlier than regular plans and might be available only at certain times of the year or to certain types of applicants. Your state insurance department can supply details.

Most states have long maintained special high-risk health insurance pools to help those who can't secure individual coverage another way. But the high cost of premiums has deterred so many eligible people that the pools serve only a few hundred thousand people in the U.S.

The Pre-existing Condition Insurance Plan

The health-reform law created a government-sponsored comprehensive health-insurance program for people who have pre-existing medical conditions. It's called the Pre-Existing Condition Insurance Plan, or PCIP.

To qualify, you have to have been uninsured for at least six months and:

Have a pre-existing condition, or

Have been denied coverage because of your pre-existing condition, or

Are shopping for insurance and have been offered coverage that excludes your condition.

You also must be a U.S. citizen or in the U.S. legally.

People who already have health insurance that excludes coverage of a pre-existing condition are not eligible.

How to apply. The application process depends on whether you live in one of the 23 states (plus the District of Columbia) that have chosen to let the federal government administer their programs, or one of the 27 states that have elected to run programs on their own. This interactive map will tell you which kind of program your state has and give you contact information for the state-run programs. If the federal government is running your state's program, you can apply directly at PCIP.gov.

What it costs. Those who qualify pay a monthly premium just as if they were buying private coverage. But the premiums are subsidized by the government. When the program started in 2010, enrollment was slower than expected, presumably because of the cost of the premiums. Since then, they have been cut. Today, the monthly premium for a federally run plan for a 50-year-old is around $200 to $560 depending on the state and the size of the deductible (which is $1,000 to $3,000). Look up the PCIP premium in your state.

When it will end. The PCIP program will last until Jan.1, 2014. On that date, under the health-reform law, all Americans will become eligible for insurance that can't discriminate or be priced differently on the basis of pre-existing conditions. ** Update: The government closed all PCIPs to new enrollment in early 2013 because the funds set aside to subsidize the program were about to run out. **